Property due diligence is the most critical step in any Bali investment. This checklist covers land title verification, zoning, permits, tenancy, and legal structuring — everything a foreign investor needs to check before committing capital to Bali real estate.
Why Due Diligence Cannot Be Skipped
The Bali property market has attracted significant foreign investment for decades, and while the vast majority of transactions complete without issue, there are real risks from unclear land titles, undisclosed encumbrances, zoning violations, and poorly drafted ownership structures. Foreign investors — who may be less familiar with Indonesian law and local customs — are particularly important to conduct rigorous due diligence before any purchase.
Land Title Due Diligence
- Certificate type: Confirm the land certificate — Hak Milik (preferred for HGB through PT PMA), Hak Guna Bangunan (HGB), Hak Pakai, or other classification.
- Certificate authenticity: Have a licensed Indonesian notary (PPAT) verify the physical certificate against National Land Agency (BPN) records.
- Ownership history: Review ownership chain at BPN to confirm no disputes or historic claims.
- Encumbrances: Check for mortgages (Hak Tanggungan), court orders, or other registered encumbrances.
- Physical boundaries: Conduct a cadastral survey to confirm the land boundaries match the certificate.
Zoning and Permit Due Diligence
- Zoning classification: Confirm the land is zoned for your intended use. Agricultural land (sawah) cannot be built on without a costly reclassification process. Check spatial planning (RTRW) documents.
- Building permit (IMB/PBG): For completed buildings, verify the building permit is current and matches the actual structure.
- Tourism and business permits: For rental villas and hotels, confirm all required operational permits are in place or obtainable.
- Environmental permits: AMDAL or UKL/UPL environmental assessment may be required for larger developments.
Financial and Tax Due Diligence
- Seller tax compliance: Confirm the seller has paid all land and building taxes (PBB) to date.
- Transfer taxes: Plan for BPHTB (5% of transaction value paid by buyer) and PPh (2.5% paid by seller).
- Rental income tax: If purchasing an operating villa, understand the current tax treatment of rental income.
Red Flags to Watch For
- Sellers who resist BPN verification or delay providing original certificates
- Prices significantly below market — often indicates undisclosed problems
- No building permit (IMB/PBG) for an existing structure
- Buildings on agricultural (sawah) land without zoning reclassification
- Nominee arrangements proposed as alternatives to PT PMA
Invest Lands Bali coordinates all aspects of property due diligence through our network of licensed notaries, surveyors, and legal advisors. Contact us via WhatsApp +62 811-3941-4563 before committing to any Bali property purchase.
